When it comes to options trading, timing is everything. But how do you know if an option is cheap or expensive?
Enter the Implied Volatility Rank (IV Rank) — a simple yet powerful indicator that helps you make smarter trading decisions.
In this blog, we’ll break down what IV Rank is, how it works, and why it’s a must-have tool for both beginner and experienced options traders. 
What is Implied Volatility (IV)?
Before we dive into IV Rank, let’s quickly understand Implied Volatility.
Implied Volatility (IV) represents the market’s expectations for how much a stock might move in the future.
High IV = High uncertainty
Low IV = Stable expectations
Options prices rise with higher IV because more volatility means more profit potential — and risk.
What is IV Rank and Why Does it Matter?
IV Rank tells you how current implied volatility compares to its range over the past year.
It’s a value between 0 and 100:
IV Rank of 80 means current IV is higher than 80% of the past year
IV Rank of 20 means current IV is lower than 80% of the past year
In simple words, IV Rank shows if options are overpriced or underpriced — perfect for timing entries and choosing the right options strategies.
How IV Rank is Calculated
Here’s the basic formula:
IV Rank = (Current IV – 1-Year Low IV) ÷ (1-Year High IV – 1-Year Low IV) × 100
This gives you a clear percentage ranking of current implied volatility.
IV Rank vs IV Percentile
Though similar, they’re not the same:
IV Rank compares the current IV to its 1-year range
IV Percentile shows how often IV was below the current level over a time frame
Most traders use IV Rank because it’s easier and more intuitive.
How to Use IV Rank in Options Trading
High IV Rank (Above 50-60):
Options are expensive
Great time for selling options (like Iron Condors, Covered Calls, Strangles)
You benefit from IV crush and premium decay
Low IV Rank (Below 30):
Options are cheap
Good time for buying options (like Long Calls, Long Puts, Debit Spreads)
You want IV to rise after entry
When to Sell or Buy Options Using IV Rank
| IV Rank Level | Market Mood | Best Strategy Type |
|---|---|---|
| 70 – 100 | Very Volatile | Sell Premium (Spreads) |
| 40 – 70 | Neutral | Neutral Strategies (Iron Fly) |
| 0 – 40 | Calm/Stable | Buy Premium (Long Options) |
Use this as a quick cheat sheet before placing any options trade.
Final Thoughts
Implied Volatility Rank (IV Rank) is a go-to tool for serious options traders.
It’s simple, visual, and incredibly useful for:
Deciding when to trade
Choosing the right strategy
Avoiding overpaying for premiums
So the next time you open an option chain — don’t forget to check the IV Rank. It might just be the difference between a winning and losing trade.
